The 30D & 45X Tax Credits Explained: What’s at Stake for the U.S. Clean Energy Manufacturing and EV Supply Chains  

Existing tax credits modified in the recently passed One Big Beautiful Bill Act of 2025 (OBBBA) are about to negatively impact the domestic automotive industry – a major economic driver and job creator. Just as traditional automotive manufacturers were accelerating work to build out electric vehicle (EV) supply chains, the OBBBA phases out existing tax incentives, including the clean vehicle tax credit (30D) and the advanced manufacturing credit (45X).  

These tax credits helped catalyze significant job creation across the industry. As of June 2025, an estimated 62,700 jobs were created, and a total of $48.3 billion was invested in the manufacturing of batteries, in part due to 45X. Announced investments of $41.7 billion and more than 72,000 jobs are linked to facilities producing EVs and batteries eligible under the 30D tax credit.  

This analysis breaks down the 30D and 45X tax credits, how recent changes to these credits might influence the U.S. automotive industry, and a potential path forward. 

What are the 30D and 45X tax credits?  

The 30D and 45X tax credits are key federal incentives that were signed into law in 2022 to support a robust clean energy manufacturing ecosystem in the United States.  

The 30D credit offers eligible buyers of new clean vehicles up to $7,500 in savings. Although most EVs are cheaper to own over the course of their lifetime than their gas-powered counterparts, they tend to be more expensive up front. This tax credit was designed to help offset the higher cost of new electric vehicles, making them more affordable for Americans at the time of purchase. Starting in 2024, there are new eligibility requirements for clean vehicles; they cannot contain battery components that are assembled by a specified foreign entity, meaning that to receive the 30D tax credit, components from foreign countries that threaten U.S. national security cannot be used in eligible EV production.  

The 45X tax credit supports the production of America’s supply of battery cells and critical minerals crucial for EV batteries, such as lithium, cobalt, and nickel. It also supports the domestic production of the components of clean energy technologies, such as solar and wind. It offers producers of eligible battery cells a credit of $35 per kilowatt-hour (kWh) of maximum capacity. The 45X credit also provides producers with a 10percent credit on costs incurred while producing critical minerals to the required purity levels.  

Why 30D and 45X Matter  

The 30D and 45X tax credits are crucial to supporting the global competitiveness of the American automotive industry. Without the incentives, the American EV market will continue to lag far behind foreign competitors like China.  

The 30D tax credit is a central driver of EV affordability, domestic job growth, and reduced reliance on specified foreign entities. Through its domestic content requirement, it incentivizes the domestic production of EV components, encourages investment in the domestic EV supply chain, and helps ensure that consumers who want to go electric can buy American-made vehicles.  

The 45X tax credit is crucial in supporting American manufacturing of battery materials, strengthening domestic energy security, creating U.S. jobs, and accelerating investment in American communities. It lowers the costs of production to help domestic producers compete with mature markets that have lower production costs, such as China. It also provides a tax incentive to drive growth in domestic manufacturing of battery components and the refining or recycling of critical minerals.   

The credits are intended to operate in tandem: 30D makes American-made EVs more affordable for consumers while 45X makes it cheaper to build batteries domestically, which also makes EVs more affordable. Together, 30D and 45X are crucial to supporting the domestic EV market. 

OBBBA Changes to 30D & 45X 

Under the recently passed OBBBA, the 30D tax credit will now sunset on September 30, 2025 – seven years earlier than previously planned in the IRA. This will impact the EV market and its domestically produced materials significantly. Repealing 30D could: 

• Reduce the ability of consumers to buy EVs, dropping market demand as EV prices rise,  

• Increase risks to the domestic battery supply chain as the domestic and global industry becomes more reliant on cheaper, foreign EV components, and  

• Decrease domestic investment and job creation as it becomes more expensive to establish U.S.-based EV supply chains. 

As for 45X, the OBBBA limits credit use until certain Foreign Entities of Concern (FEOC) requirements are met. FEOC rules apply at two levels: the foreign taxpayer level (prohibiting companies based in China, Russia, Iran, and North Korea from claiming the credit) and the product level (prohibiting a percentage of components sourced from these same countries). Beginning in 2027, integrated components will only qualify for the tax credit if they’re built into another element at the same facility, sold to an unrelated buyer, and made with at least 60 percent U.S.-sourced materials. 

 The new FEOC rules are expected to: 

• Ensure prohibited foreign entities (PFEs) cannot claim the credit: meaning that if a company is owned or controlled by a PFE, it is not eligible for the credit 

• Restrict material assistance from PFEs: companies are limited in purchasing specified amounts of key minerals, components, or materials from foreign entities. 

• Restrict licensing agreements with PFEs: meaning that companies can’t use technology or patents licensed from FEOCs in projects claiming the credit. 

• Restrict financial arrangements with PFEs: companies are limited in establishing specific funding or investment arrangements with specified foreign entities. 

The new FEOC rules impose higher upfront costs on EV supply chain investment, encourage investors to relocate to markets outside of the United States, and complicate credit adoption, creating an uncertain environment for the domestic battery supply chain. Shortening the runway for 30D —which may lead to ceding market share to foreign vehicle manufacturers—and tightening 45X requirements hinder both the supply and demand sides of EVs in America.  

The Path Forward  

Despite the obstacles that the revised tax credits will bring, there are still ways to navigate future challenges. For example:  

• States can enact clean energy manufacturing policies to support EV adoption 

• The U.S. Department of Treasury can work with industry to streamline FEOC compliance guidance to support continued 45X tax credit adoption   

• Key players across the industry can continue to strengthen regional coordination through dialogue.  

Ensuring holistic support for the U.S. battery supply chain helps meet the rising demand for advanced energy technologies while ensuring supply chains remain secure, domestic, and globally competitive. C2ES’s Regional Clean Economies Initiative is working to bring together businesses, policymakers, and community members in the Southeast to explore scalable solutions to support the domestic battery supply chain.